Can You Sell or Buy a House With a Tax Lien? What You Need to Know

As of 2022, you can expect to pay an average of over $350,000 for a home in the United States. As time goes on, the price of real estate will continue to increase. However, things can quickly become complicated if there are tax liens involved. 

So, can you sell or buy a house with a tax lien? We've put together a brief guide that has all of the information you need to know. Let's dive in. 

So, What Is a Tax Lien? 

A tax lien is a claim that the government has on your property. 
 
This means that if you owe money to the government in taxes, they can put a lien on your home. This gives them the right to seize your property and sell it in order to recoup the money that you owe. 

What Are the Different Types of Tax Liens? 

Interestingly, there are multiple different types of tax liens you may experience. The first is a federal tax lien. This is the most common type of tax lien and it happens when you fail to pay your federal taxes. 
 
The second type is a state tax lien. These occur when you don't pay your state taxes. 

Finally, there is a property tax lien. Homeowners experience these when they don't pay their property taxes. 

What Are the Consequences of Having a Tax Lien? 

If you have a tax lien on your property, it can become difficult to sell or refinance your home. This is because most lenders will not want to provide financing for a property that has a tax lien on it. Additionally, having a tax lien can also negatively impact your credit score. 
 
It's also worth noting that having a lien on your property could prevent you from securing certain types of funding. For example, if you wanted to start a business and get a business loan to do so, your lien may prove to be a complication. 

Can You Sell or Buy a House With a Tax Lien? 

In short, yes. 
 
You can sell a property that has a tax lien on it, but it may be difficult to find a buyer who is willing to take on the lien. Additionally, you may have to sell your home for less than its market value in order to entice a buyer. Unfortunately, this could create a difficult financial situation for the seller. 
 
To clarify, let's assume that you owe a substantial amount of money on tax liens. To find a buyer, you have to sell your home well below the market rate. 
 
Selling your home for less than what it's worth combined with your obligation to pay your tax lien could leave you with very little capital to purchase another home. 

It's also worth mentioning that you cannot profit from the sale of your home until you have used the proceeds of the sale to pay off the lien. You also cannot refinance your mortgage until you have satisfied your outstanding tax obligations. 
 
Simply put, it's in your best interest to take care of your tax lien before you attempt to put your home on the market. 

You can also purchase a property that has a tax lien on it. However, you'll need to be aware of the risks involved. 
 
You may have difficulty securing financing for the purchase. This is because most lenders will not want to finance a property that has a tax lien on it. Additionally, you may run into complications if the lien is not resolved before you attempt to sell the property in the future. 
 
Under the right circumstances though, buying a home that has a tax lien can allow you to take advantage of a great deal that would otherwise be unavailable to you. 

How Can I Manage a Tax Lien? 

Although the situation can be highly difficult to navigate, there are various ways that you can handle it. 
 
One method is to try and negotiate a tax lien payment plan with the government. This will allow you to spread out your payments over a period of time, making them more manageable. Additionally, you can try and negotiate a reduction in the amount that you owe. 
 
If you're able to prove that you're unable to pay the full amount, the government may be willing to work with you. Another method is to try and have the lien removed from your property. 
 
This can be a complicated process, but it may be possible if you're able to prove that the lien was placed in error. Whichever method you choose, be sure to get in touch with a legal professional before doing so. 
 
They have the tools and resources to guide you and ensure that you make the choice that is best for your situation. The same can be said about working with an experienced real estate professional. Doing this will give you a much better chance of finding a buyer. 

Dealing With Tax Liens Doesn't Have to Be Difficult 

At first, a tax lien might seem like the end of the world. However, it's important to remember that there are options available to you. 
 
With the help of a qualified professional, you can manage your tax lien and move forward with your life. 

If you are a real estate investor looking or low-cost tax lien properties that the seller needs to get rid of quickly, we are the number one team for tax lien property lead lists. Give us a call at 402-235-4556 to start buying tax lien properties with accurate leads that work!